8. Property, plant and equipment

8. Property, plant and equipment

Basis the triggers and indicators of impairment and consistent with the annual assessment for impairment of Goodwill (see Note 7) Property, Plant and Equipment as at 31 March 2026 was tested for impairment. This involves the Group estimating the recoverable amounts of individual Cash Generating Units (CGU). See the Critical Judgements in Applying the Group’s Accounting Policies for further information with regards to the definition of CGU’s.

European countries including the Netherlands have legal requirements to reach net zero by 2050. Decarbonisation is central to the long-term strategy of TSN which has set out its ambitions to be carbon neutral by 2045.

During the financial year, Tata Steel Nederland made substantive progress in advancing the Green Steel Project. In September 2025, TSN, Tata Steel Limited, the Dutch State and the Province of North Holland entered into a Joint Letter of Intent (JLoI), establishing a framework and agreed intent, and setting out milestones, aimed at working towards a legally binding Tailor-Made Agreement. The JLoI sets out TSN's intention to execute Phase 1 of the Green Steel Project, including the construction of a Direct Reduced Iron plant and an Electric Arc Furnace to replace Blast Furnace 7 and Coke and Gas Plant (“CGP”) 2, together with the implementation of a comprehensive package of environmental measures. Phase 1 is intended to deliver substantial reductions in CO₂ emissions and further improvements in local environmental performance, subject to specified conditions, regulatory approvals and the conclusion of a final Tailor-Made Agreement. The State has expressed its intention to provide significant one-off financial support, subject to regulatory approval and fulfilment of agreed conditions.

In parallel, TSN has progressed permitting activities, submitted the Environmental Impact Assessment and integrated the Green Steel Project within the broader SCALE transformation programme.

Regulatory compliance and licence‑to‑operate considerations were assessed as part of the impairment indicator evaluation. The impairment assessment assumes continued licence to operate for relevant legacy installations during the transition period. In assessing regulatory risk and licence‑to‑operate uncertainty, based on recent engagement with regulators and other developments, management has identified and taken into considertation the impact of a reasonable possible scenario of accelerated closure of both CGP's  in the base valuation model considered for impairment assessment.

Considering presence of these internal and external indicators the management has carried out impairment assessment for the Property, Plant and Equipment’s for the year ended March 31, 2026.

For the purposes of TSN’s 31 March 2026 year‑end reporting under IFRS, detailed impairment reviews were conducted for, amongst others, the most material CGU (Business Unit IJmuiden, primarily comprising Tata Steel IJmuiden B.V.). The recoverable amount of CGU BU IJmuiden has been determined using a fair value less costs of disposal (‘FVLCD’) approach, as this is considered to better reflect a market participant perspective, including assumptions regarding the decarbonisation transition and anticipated external support, compared with a value in use calculation. TSN applied an income approach valuation technique to determine fair value. All critical assumptions used in the present value determination reflect market participant views and market‑based assumptions. Cash flows from FY 2027 to FY 2050 were discounted, with a terminal cash flow applied in FY 2050.

CGU Business Unit IJmuiden

The recoverable amount of Business Unit IJmuiden CGU has been determined from a fair value less costs of disposal (‘FV’) calculation. The FV calculation involves estimating future cash flows that TSN expects to derive from the CGU using the Annual Plan FY 27, with explicit cash flow projections for FY28–FY50, followed by a terminal value. The objective of using an extended explicit forecast period is to capture the full economic impact of the CGU’s long‑term transformation and to reflect market‑participant assumptions over the entire transition cycle. The length of the forecast period reflects the specific characteristics of the CGU, including the multi‑phase nature of the Green Steel transformation programme, the extended transition period during which existing assets continue to operate alongside newly installed low‑carbon assets, and the time required for production, cost structures and cash flows to stabilise following commissioning and ramp‑up of new installations. The explicit forecast period therefore enables the valuation to reflect a realistic progression towards a steady‑state level of cash flows that is representative of long‑term, sustainable performance under normalised market conditions, consistent with a market‑participant fair value perspective.

TSN intends to transition in a phased manner away from coal‑based blast furnace steelmaking towards steel production using Direct Reduced Iron (“DRI”) technology and Electric Arc Furnaces (“EAF”), with assets designed to be hydrogen‑ready, subject to the future availability and affordability of low‑carbon energy. The initial phase of the Green Steel Project comprises the construction of a DRI plant and an EAF, intended to replace one blast furnace, which forms part of the ongoing discussions with the Dutch State in the context of the Joint Letter of Intent and the envisaged Tailor‑Made Agreement. The fair value calculation incorporates assumptions regarding capital expenditure required to pursue decarbonisation, together with assumptions on government support consistent with the non‑binding framework of the Joint Letter of Intent. The projected cash flows further reflect business improvement initiatives, the expected operational benefits arising from the planned capital investments, and management’s expectation that the timing of the closure of coke and gas plant assets may be brought forward, with the related impacts reflected directly in the cash‑flow projections.

Key assumptions for the FV model include expected developments in selling prices and raw material costs, levels of EU steel demand, and energy and network costs. The model reflects the expected evolution of the IJmuiden production configuration over the forecast period, including management’s current expectations regarding the phased closure of Coke and Gas Plants (“CGP”) 2 and CGP 1 assuming that such closures are executed in a controlled, safe and responsible manner.

The FV model further incorporates assumptions regarding the timing and availability of permits and regulatory approvals required to support ongoing operations and future investments, the successful delivery of the business improvement initiatives reflected in the Annual Plan, anticipated capital expenditure requirements in relation to decarbonisation, changes to EBITDA associated with the production and sale of lower‑carbon steel products, the timing of commissioning of new production facilities, and the expected impact of existing and proposed regulatory measures, including CBAM, on competitive dynamics within the EU steel market. A post‑tax discount rate of 8.15% has been applied.

In particular, during the year TSN signed a Joint Letter of Intent (“JLoI”) with the Dutch government in relation to its green steel transition. At the reporting date, however, these discussions remain ongoing and no formal or binding agreement has been concluded. The Group however believes that the key assumptions applied represent its best estimate of the most likely impact of decarbonisation at this point in time, based on information currently available.

These assumptions are subject to inherent uncertainty and will continue to be monitored and reassessed in future periods, particularly as decisions are taken regarding the timing and execution of CGP closures, decarbonisation investments become committed, permitting processes progress and external market and regulatory conditions evolve. The key assumptions also remain an active topic of dialogue with the Dutch government.

For the FV calculation, a set of inflation assumptions is used to extrapolate the cash flow projections up until the terminal year at which point a 2.0% (2024-25: 2%) growth rate is used on future cashflows into perpetuity. The post-tax discount rate of 8.15% (March 31, 2025: 8.2%) is derived from the Group’s weighted average cost of capital (WACC) and the WACCs of its main European steel competitors. 

Outcome of the Impairment Assessment

The impairment test resulted in a recoverable amount of €3,677 million, compared with a carrying value of €2,721 million, indicating headroom of approximately €956 million. Accordingly, no impairment of goodwill or property, plant and equipment was recognised for CGU Business Unit IJmuiden in FY2026 (FY2025: nil).

Sensitivity Analysis and Key Sources of Estimation Uncertainty

The recoverable value has been determined and stress tested after appropriately considering the major downside impact of probable risks which the business may get exposed to. It remains the directors’ best estimate that government support would be provided broadly in line with intentions observed in the JLoI signed September 2025. However, if the scope, timing or level of support ultimately provided by the Dutch government were to differ materially from current expectations, this would have a material impact on the valuation of property, plant and equipment and could significantly affect the manner and timing in which the Group’s decarbonisation plans are realised. Also, if the ongoing discussions with the authorities do not result in the timeline expected by management to ensure a controlled, safe and responsible closure of the cokes and gas plants then there could be a material impact on the valuation of property, plant and equipment. Also, if the support from the Dutch government would not be within the timeline and conditions as included in the Joint Letter of Intent, then there would be a material impact on the valuation of property, plant and equipment. This could also have a significant impact on how the current decarbonisation plans could be realised. In addition, the Group has performed a number of sensitivity analyses as part of the impairment assessment of the carrying value of the CGU BU IJmuiden.

Discount Rate Sensitivity

• an increase in the discount rate by 30 basis points will lead to a reduction in recoverable value by €345 million as a result the revised surplus will be €611 million;

Terminal Growth Rate Sensitivity

• a reduction in the terminal growth rate from 2.0% to 1.0% will lead to a reduction in recoverable value by €360 million as a result the revised surplus will be €596 million;

Volume Sensitivity

• a 2% reduction in forecast delivery volumes across the explicit forecast period, reflecting potential operational disruptions, extended maintenance shutdowns or lower market demand will lead to a reduction in recoverable value by €576 million as a result the revised surplus will be €380 million;

Margin / Spread Sensitivity

• a sustained adverse steel spread scenario, equivalent to a 2% reduction in spreads (approximately €10 per tonne) across the explicit forecast period, lead to a reduction in recoverable value by €856 million and results in a revised surplus of €100 million;

Timing of receipt of Decarbonisation Government Support

• a delay of 12-months in the receipt of assumed government support related to decarbonisation investments will lead to a reduction in recoverable value by €108 million as a result the revised surplus will be be €848 million.

Other CGUs

For all other CGUs within the TSN Group, recoverable amounts were assessed using value‑in‑use (“VIU”) calculations, reflecting the expectation that these CGUs will continue to be operated and the limited availability of observable market data for comparable assets. This VIU calculation uses cash flow forecasts based on the most recently approved financial budgets and strategic forecasts which cover a period of three years and future projections taking the analysis out to perpetuity based on a steady state, sustainable cash flow reflecting average steel industry conditions between successive peaks and troughs of profitability.

Key assumptions for the value in use calculation are those regarding expected changes to selling prices and raw material costs, EU steel demand, energy costs, exchange rates, and a pre-tax discount rate of 11.0% (2024-25: 11.0%). Changes in selling prices, raw material costs, exchange rates and EU steel demand are based on expectations of future changes in the steel market based on external market sources.

The outcome of this assessment indicated that none of the CGUs in the TSN group had a recoverable amount which was lower than its carrying value.